Global competition drove a wedge in the cozy relationships between tele-communication and network equipment suppliers and the big businesses and tele-communication service providers buying their products. And it seems times are changing again.
Network equipment users will find fewer avenues to seek new equipment, as the big international vendors like Nortel Networks Corp. and Motorola Inc. pull out of some markets to focus on their core lines of business, a recent market study from Stamford, Conn.-based Gartner Inc. predicted.
The changes within equipment companies will be radical. The packaging of Nokia Corp. or Cisco Systems Inc. may look the same, but underneath the businesses will be catering to a more select clientele of only the largest equipment buyers, leaving users with smaller pocketbooks to scramble for attention, said Bhwani Shankar, a Gartner principal analyst.
Gartner’s researchers believe vendors will cease attempts to become one-stop shops for all the network equipment needs of their clients, Shankar said. The eight largest telecom equipment providers – accounting for 80 per cent of sales – were the subject of the study, he said. And most of their telecommunication equipment sales came from the top 20 carriers worldwide.
“We looked at some of the publicly switched telephone network vendors like Nortel, who are wedded to their mainstream telecom clients,” Shankar said. In recent years, Nortel and other large telecom vendors have diversified into the router space, edge-network equipment and other enterprise-network gear.
“In a recessive economy, one of the things we’ve seen them doing is cutting back on the enterprise business,” he said.
Recent quarterly investor calls have borne this out with examples abounding. Nortel said it would focus on long-haul optical and metropolitan-area networks (MAN) and wireless equipment, leaving out enterprise network gear. Motorola sold off its Multi-service Networks
Division (MND) earlier this year. Lucent Technologies Inc. exited the fixed wireless, cable access and small competitive local exchange carrier optical systems businesses, and has withdrawn from some enterprise markets.
“It’s an open battlefield that’s closing very, very fast. There’s going to be far too much competition in far too short a time,” Shankar said.
However, the shifting market will have an overall positive effect for consumers
of this network technology, Shankar said. The efforts of equipment makers to spread out into new markets “was an artificial bringing together of skills that didn’t exist in the company,” he said. Telecom equipment makers struggled to make routers, while enterprise equipment makers laboured to build switches. “Customers weren’t getting the best-of-breed in the technology … some (executives) were making sacrifices in quality to get a better deal from a single vendor.”